Term Paper on "Former IBM CEO Lou Gerstner"

Term Paper 5 pages (1692 words) Sources: 3 Style: APA

[EXCERPT] . . . .

leadership in an American company. Specifically it will research former IBM CEO Lou Gerstner and his leadership style. Lou Gerstner served as CEO of International Business Machines (IBM) from 1993 through 2002. He helped turn the company around in the 1990s, and is credited with saving the company from financial failure. Gerstner retired in 2002, and now serves as a consultant to IBM and serves as CEO to the Carlyle Group, a global private equity firm located in Washington, DC (Editors, 2003). He also sits on several other boards and groups, and is a strong advocate for educational reform in the country.

Before arriving at IBM, Gerstner was the CEO of RJR Nabisco, and held senior leadership positions at American Express and McKinsey & Company. He was born in Mineola, New York in 1942 and graduated from Dartmouth College in 1963 and took an MBA from Harvard Business School in 1965. He began his career in 1965 with the management-consulting firm of McKinsey & Co., Inc., where he worked as a director. He left McKinsey in 1978 to work with American Express, rising to the rank of president of American Express by 1985. During his tenure at American Express, he helped increase card membership in the company, invented new advertising and recruitment techniques, and helped make the company more profitable than it had been in years. After eleven years with American Express, Gerstner left to take on the role of CEO of RJR Nabisco, where he remained for four years before he joined IBM.

When Gerstner joined IBM in 1993, the company was on the verge of financial collapse. He managed to turn the company around, make it profitable, and empower employees during his time as CEO. Gerstner is a transformational leader, as his time in many of the companies he has headed clearly shows. At American Express, he changed the way the company did business, taking the company around the world, and adding women and young people to its market share. In his book Who Says Elephants Can't Dance? he writes, "There had been eleven different currencies in which the American Express Card was issued when I arrived, and twenty-nine when I left" (Gerstner, 2002, p. 85). In fact, he was hired to transform IBM into a profitable company again, but many of the ways he did it were far different from many people expected.

First, Gerstner determined that IBM was in a cash crisis when he arrived on the job, and it was dangerously close to going under. Another writer notes how Gerstner began to reorganize and change the company almost as soon as he arrived. She writes, "Under his guidance, IBM cut billions in expenses (partly through massive layoffs) and raised cash by selling assets. Gerstner says that few people even understood how perilously close the firm was to running out of cash" (DiCarlo, 2002). He also consolidated operations, and began a bold plan to re-tailor IBM's systems and software from the ground up to create "top-to-bottom technology solutions" (DiCarlo, 2002). It is precisely that he did not conform to the old-school technological beliefs that he was able to put this plan into action, and it helped transform the company and build on his reputation as a transformational and forward thinking leader.

Another point that proves Gerstner is a transformational leader are his thoughts about many old-school corporations like IBM, who have been in business so long they may have lost touch with their products and consumers. He says in an interview, "They're thinking how can we continue to do what we've done in the past without understanding that what made them successful is to take risks, to change and to adapt and to be responsive" (DiCarlo, 2002). His entire tenure at IBM was involved in change, growth, and transformation, and that was the only way IBM was going to survive in an increasingly PC-dependent computing world. In fact, he sees himself as a transformational leader, as well. He says, "Reorganization to me is shuffling boxes, moving boxes around. Transformation means that you're really fundamentally changing the way the organization thinks, the way it responds, the way it leads. it's a lot more than just playing with boxes" (Quest, 2002). Thus, transformational leadership most aptly describes Gerstner's leadership style. He seems like a charismatic and strong leader, but his style is much more transformational.

It is also interesting to note that Gerstner at first baulked at taking the job, since he had no experience in the technology field. However, he soon came to reflect the mission of the company extremely well, at least partly by redefining that mission. He found that the old IBM was somewhat smug in its operations, and had begun to take itself more seriously than it took its customers. Internally, staff competed against other divisions rather than other corporations, and there was a general lack of teamwork and cooperation on all levels of the company. Gerstner changed that by altering the way employees were compensated. He tied their incentives to profits throughout the organization, rather than just their division, and then condensed all of IBM's advertising into one agency that would create a company-wide brand and mission, further unifying the employees under a common goal. While he was not experienced in the field of technology, he was extremely experienced at transforming companies and altering their missions so they could become even more successful, and with IBM, he reflected the mission so well that his name has become synonymous with IBM's restructuring and eventual rebound into the technology marketplace.

As Gerstner became more familiar with the operations, he became even more an ambassador for the company's mission. In an interview he says, "What I came to understand is that IBM has a pervasive impact on all forms of society; medical research, education, national security -- but not just U.S. national security, we work for a lot of governments around the world" (Quest, 2004). Thus, the company had an intensely important mission, and he supported that mission because it in turn supported the missions of so many other corporations and countries.

Gerstner is an extremely ethical leader, who expected the same ethical standards from the people around him. Soon after he took over leadership of IBM, he said in a company-wide memo, "I'm a big believer in quality, strong competitive strategies and plans, teamwork, payoff for performance, and ethical responsibility" (Gerstner, 2002, p. 24). In addition, IBM had always lived under an extremely ethical corporate structure, first engineered by Thomas J. Watson, Sr., who joined the fledgling company in 1914, and built it from a small regional operation to the world's foremost technological company by the 1980s (His son, Thomas J. Watson, Jr. took over the company in 1956).

Thus, IBM had a long-standing reputation as an ethical and reputable business, and Gerstner continued these ethical business practices throughout his tenure at the company. He does not condone these practices in his company, and he is shocked when other companies use unethical or questionable business practices. Another writer notes, " He is shocked, for instance, that executives like Sun Microsystems' Scott McNealy, Oracle's Larry Ellison and Microsoft's Bill Gates publicly criticize each other and each other's companies" (DiCarlo, 2002). Thus, Gerstner may have played out his career at just the right time, as the ethics of many even old-school companies are coming more into question. A leader who gained his leadership experience in the 1960s through the 1980s, Gerstner may represent a different breed of leader - transformational, ethical, successful, and concerned, rather than charismatic, unethical, and greedy. It is also interesting to note that Gerstner initially thought he would become a teacher, which also may indicate some of his feelings on ethics. Teaching is probably still regarded as one of the most… READ MORE

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